In the best year for U.S. stocks since 1995, the smart way to play the markets has been to follow the dumb money.

So-called dumb-money strategies, which involve buying and holding a plain-vanilla portfolio of U.S. stocks, did much better than the more complex approaches employed by hedge funds and other professional investors.

Fueled by easy money from the Federal Reserve and signs of improvement in the economy, the Dow Jones...